Many Britians Are Paying More Than Their Neighbours For Their Energy Bills

By Cynthia Taylor

There are about 5 million people in the UK who are being unfairly overcharged on their energy usage, IPPR an energy think-tank has called on Ofgem, energy regulator that some British consumers as paying as much asmuch as $330 more than their neighbours who use the same amount of electricity and gas.

The IPPR have asked Ofgem to stop suppliers offering customers heavily discounted, loss-leading offers, they argue that by enforcing cost-reflective tariffs it would improve the competition in the energy market, at the same time more than offset the costs of green policies.

An energy website has hit back at this saying that the discouragement of energy companies to offer attractive new incentives and deals would worsen the problem because people will have no incentive to shop around for the best deal.

The IPPR demands that Ofgem enforces the requirements for licensing it introduced to ensure that the tariffs are ‘cost-reflective’ and that theystop suppliers offering non-cost reflective tariffs – for instance – offering discounts that are not based on costs.

IPPR have further called on the regulator to act with great urgency on a matter of admission in 2007 that tariff differentials are based on payment type that are not cost reflective.

Ofgem is in consultation about reforms of the energy market, and will be concluded during summer. The aims are to simplify the number of tariffs and the structure of these tariffs and to cut tariffs that have no set end date to ‘one per payment’ model and the type of fuel used.

Director of IPPR, Nick Pearce said that at this time where the living standards are falling, and families are battling to pay their energy bills, it was unacceptable to find that people are being overcharged for their energy usage. He continued that the ‘loss leading’ offers by some of the suppliers, limits the competition in the energy market, it makes it harder for the smaller suppliers as well as new entrants to compete against them.

The report has found that customers on the ‘standard credit account’ – those customers who pay for their energy usage in arrears – are called ‘sticky customers’ the reason being is these customers are less likely to switch tariffs or suppliers and are the one that are paying the highest tariffs.

At present there are more than 400 different tariffs that are on offer on the energy market.

It was found that Scottish Power offered the greatest differentials between standard and their cheapest tariff – the difference being £330 and next highest differentials was Npower with £315. IPPR’s report found that more than 60% of households have never switched an energy supplier, and that 34% are on the standard credit account system, this means they are probably paying high energy bills.

Spokesperson from Ofgem said that they welcomed the debate and would be taking into account all the evidence presented before they make any final decision on the proposal for this summer.